Guide to Business Franchise Opportunities
Many entrepreneurs have started their business by exploring business franchise opportunities.
If buying an existing business and starting from scratch sounds a bit intimidating and equally important, does not sound right for you, then buying a franchise may suit you.
When you buy a franchise, you may be able to sell products and services that have instant name recognition and get training and support that can help you succeed. However, purchasing a franchise is just like any other investment, in that there is no guarantee of success.
What is Franchising?
Essentially, franchising is an authority given by a company (the franchisor) allowing you (the franchisee) to operate a business. A typical franchise business model consists of you (the franchisee):
- Paying a sum of money (franchise fee) to the franchisor,
- Having to use a format or system developed by the company (the franchisor),
- Obtaining the right use the franchisor’s name, trademark ,and reputation for a specific number of years,
- Receiving initial business training and continued management assistance.
Advantages of Owning a Franchise
First and foremost, getting involved with a franchise can give you the opportunity to own a business without the challenging task of:
- Having to build up a solid business reputation.
Buying a franchise offers many other advantages that are not available to entrepreneurs who are looking at starting their own business from scratch such as:
- As a new franchisee, you can usually avoid a lot of the mistakes many start-up entrepreneurs typically make. Because, in many cases, the franchisor, through trial and error has already had the opportunity to perfect the daily operations.
- Reputable franchisors will have already conducted market research well before selling a new franchise outlet. Knowing that there is a demand for the product or service your franchise outlet is proving, can give you greater confidence.
- Your franchisor can provide you with a clear picture of who your competitors are and more importantly, they can help you to differentiate your franchise business from your competitors.
- You should receive savings through the franchisor’s chain buying power in relation to the purchasing of:
- Advertising materials, and
- Other business needs.
- In joining a franchise network, you as a new business owner will become a member of an exclusive group of peers, who:
- All operate a similar business,
- All face similar challenges, and
- All can share and benefit from each other’s solutions.
- You will receive ongoing support, guidance, and advice from the franchisor.
- You are likely to have an accurate estimate of what your set-up costs are.
Disadvantages of Owning a Franchise
Now that you have read the advantages of owning a franchise, there are of course disadvantages of owning a franchise business. Here is a list of some of them:
- A franchise business will require you to conform to the policies and procedures established by the franchisor.
- The risk of failure is part and parcel of any business venture, and in this regard, franchising is not any different.
- A franchised business may cost more to initially establish than an independent business.
- A franchise is for a limited time only. In other words, a franchise does not last forever.
- You may be required to pay a separate marketing fee or levy to the franchisor.
- In addition to the above levy, you may also be required to spend a further proportion of your revenue on specific marketing in your own local area.
- There is a risk of the franchisor choosing unsuccessful marketing strategies or tactics. In the event of this occurring, all of the franchisees in the network may be negatively affected.
- As a franchisee, you are usually required to deal with suppliers that are approved and endorsed by the franchisor.
- Training for your staff may not be included in the initial price of the franchise agreement, or may not be available at times, locations or costs acceptable to you (the franchisee).
- Finally, the level of support that you may expect to receive from the franchisor may not meet your own expectations.
Please note: This is not intended to be an exhaustive list of the advantages and disadvantages of franchising. If you need to seek further advice and guidance as to the advantages and disadvantages, you should seek assistance from our expert business consultants.
How to Choose the Right Franchisor?
With so many franchise systems and models to choose from, your options can be mind-boggling. You can, however, start by:
- Performing some preliminary research and investigation on various industries that interest you.
- Analysing thoroughly your preliminary research material to determine whether it is really worth buying into a franchise. Much of the information you will need to gather in order to analyse a franchise, can be acquired through the following:
- Conducting interviews with the franchisor and also with existing franchisees.
- Examining the franchise agreement.
- Examining the franchisor’s audited financial statements (e.g. the income statements and balance sheets).
- Examining newspapers or magazines articles you can find about the franchisor.
Remember: Do not feel shy about asking the franchisor for the required information as you can be very sure that they will be checking you out.
Questions You Should Ask Yourself
Once you have gathered all the information and researched the information gathered, you should take some time out and ask yourself the following questions:
- How many years has the franchisor been in operation?
- Does the franchisor have a reputation for honesty and fair dealing amongst its franchisees?
- Has the franchisor shown you audited figures indicating exact net profits of franchise outlets that you personally checked with the franchisee(s)?
- Is the franchisor’s name, trademark and reputation publicly accepted?
- Does the franchisor have effective and reliable financial controls in place?
- How credible is the franchisor?
- What is the publics’ perception of the franchisor?
- Has the franchisor received any negative exposure? If so, what is the publics’ reaction to the negative exposure?
- Which goods and supplies are proprietary and must be purchased from the franchisor?
- Finally, what is the franchisor’s success in the particular industry it is operating in?
Contact Us Today
If you require more information on business franchise opportunities or if you have any questions, please call us today on 1300 4 SINGH or simply click here to send your question and we will contact you without delay.
DISCLAIMER: This blog post is of a general nature only and does not constitute professional advice. I strongly recommend that you seek your own professional legal and accounting advice in relation to your particular circumstances.